Oil sanctions against Russia need to be tightened to force Putin to negotiate – Bloomberg

The Biden administration is considering tightening sanctions against Russia to reduce funding for its military aggression and create conditions for peace talks, according to Bloomberg. This move, although belated, could serve as a powerful lever of pressure on Vladimir Putin's regime.

Bloomberg notes that oil and gas revenues accounted for nearly one-third of Russia's budget in 2023, making them a crucial source of funding for the war. Western democracies have already imposed a wide range of sanctions affecting transportation, finance, energy, and technology. However, Russia has demonstrated a high capacity to circumvent these sanctions. For instance, through transit routes in countries like Armenia, Kazakhstan, and Georgia, Russia continues to access Western goods.

One of the key sanctions mechanisms has been the oil price cap set at $60 per barrel. Initially effective, this restriction has seen Russia adapt by creating a "shadow fleet" of tankers that use insurance and services outside Western markets. Additionally, countries like China, India, and Turkiye actively purchase Russian oil, refine it into fuel, and then legally sell it to the EU and USA.

Bloomberg suggests that sanctions need to become more effective. For example, sanctioning ships that transport Russian oil could limit Russia's transportation capabilities. Additionally, the West should implement secondary sanctions on companies and banks that purchase oil above the set price cap or finance these deals. Furthermore, EU member states should uniformly apply sanctions and strengthen document verifications provided by shipowners.

Strengthening sanctions will require significant diplomatic effort. India, a key US partner, has already expressed discontent with the need to adhere to sanctions against other countries, such as Iran. China, on the other hand, shows readiness to counteract American restrictions. Providing companies with a certain transition period could alleviate diplomatic tensions.

Sanctions increase economic costs for Putin, whose economy is already under significant pressure. They also create more levers of influence for Ukraine and the West in future negotiations, Bloomberg concluded.

Earlier, 12 European countries adopted a joint decision to counter Russia's "shadow fleet."